Many people think of starting an online business, only to get discouraged by complexity around things like staffing, compliance, funding, and more.
But what if you could remove a few major complicating factors—carrying an inventory and shipping—and start an eCommerce business without actually needing your own inventory to procure, store, and ship?
You can, and in this article we’ll look at how to start an eCommerce business without inventory.
In the wake of COVID-19, now is a great time to start an eCommerce business. While physical retailers struggle to pivot to an online business model, new eCommerce businesses can build on an online foundation first.
This summer, GetApp surveyed more than 550 U.S. consumers to gain insight into how COVID-19 has affected their priorities and preferences (you can find our methodology at the bottom of this page) and found that 60% of consumers have been online shopping more or significantly more since COVID-19, and among those online shoppers, 73% plan to continue to shop online at that increased frequency even after the pandemic has passed.
One popular way to start an eCommerce business without inventory is through dropshipping.
Dropshipping is a type of eCommerce that allows merchants to handle every part of the online retail business except for manufacturing, storing, and shipping the product. In dropshipping, you set up a website, advertise a catalog of products, take orders and process payments, and provide customer service before and after delivery.
You just never actually see or handle the product yourself (though it’s a good idea to test samples ahead of time so you can stand behind what you’re selling). The manufacturer provides the product and ships it to customers that you specify, and you provide everything else, from marketing to customer service.
That “everything else” is a lot, but the good news is that there is software specifically designed for dropshipping to make all of those tasks a little easier and more organized.
If you’re considering starting an eCommerce business based on dropshipping, you need to go in with a clear head, because there is a lot of noise out there.
First off, be wary of shady multi-level marketing ventures, most of which are predatory pyramid schemes that you may see advertised on late night infomercials and in classified ads. Follow the old rule of thumb of “if it seems too good to be true, it probably is.”
In dropshipping, you work directly with the manufacturer to help sell their products. In multi-level marketing, there is an additional layer between you and the manufacturer, and that is the agent who is trying to get you to sell for them so that they can get a cut of your sales. They will usually try to charge you an opportunity fee or to teach you how to sell. Multi-level marketing is a get rich quick scheme—dropshipping is not.
Which leads to the second point. If you think that dropshipping is a foolproof recipe for overnight success and reliable, passive income, you need to reconsider. There is a lot of dropshipping competition out there—such as Amazon, for starters—so the only way to succeed is to work hard to give customers a good experience that they’ll want to come back to.
While dropshipping has a low barrier to entry and much less risk than owning your own supply of merchandise, it also has much smaller profit margins (because your supplier gets a significant portion), a deep reliance on your supplier, and a saturated market (the U.S. eCommerce market is estimated to be worth more than $340 billion).
If using dropshipping to power your eCommerce store still sounds like a good business idea, follow these steps to make sure you get started on the right foot.
You’re never going to compete with Amazon or Walmart, so you won’t succeed by casting a wide net. The best approach is to specialize until competition starts to drop, but where there is still a customer base.
For example, if you try to sell all kinds of phone cases, you’ll never get noticed among the myriad options, let alone compete with their pricing. Trying to sell glittery phone cases is probably still too broad, but selling glittery iPhone cases with teddy bear charms attached is the kind of specification you need to go for to find a profitable niche.
As we discussed above, in dropshipping you have a deeply symbiotic business relationship with your supplier. If you help sell their product, they’ll be more successful. And if they produce a quality product and ship it smoothly, you’ll be more successful.
But if either side fails, the whole operation fails. This is why choosing a reputable supplier may be the most important factor for a successful dropshipping business. You can have the best eCommerce website on the internet and provide world class customer service, but if your supplier produces a shoddy product, or provides unreliable shipping, your customers will disappear.
Shopify has an excellent guide on choosing a worthwhile supplier, including how to spot a fraud, and a curated list of wholesaler directories. Some eCommerce software platforms even have prescreened supplier selection tools built right in.
Having an attractive, well-organized and search-optimized website is just as important as having a good supplier if you want to have a successful dropshipping business. After all, marketing and selling is what you’re bringing to the table, and a good website is the primary online driver of those functions.
eCommerce software can shoulder a huge load of the responsibility here. The software can guide you through building your website from a variety of templates, set up your online shopping cart, create dashboards to track and analyze sales trends, integrate with suppliers and online marketplaces, and more.
Once you have your supplier and your online storefront in place, all that’s left is to sell. This step may be the biggest differentiator between successful and unsuccessful dropshipping ventures.
Here are a few resources on selling and marketing effectively to stand out in a crowded marketplace:
Dropshipping may be one of the most popular ways to start an eCommerce business without inventory, but it’s not the only way. There are also customization businesses, where you customize and resell merchandise produced by a supplier, and software/digital services businesses, where you sell a digital product, for example.
Starting your own eCommerce business without the complication of inventory can be incredibly rewarding, but you have to go into it with realistic expectations and willingness to put in a lot of hard work. Here are lots of additional resources to help you on your journey.
The GetApp COVID-19 Consumer & Employee Impact Survey was conducted in June 2020 to understand how the priorities and preferences of people—as consumers, employees, and patients—have shifted due to COVID-19. We surveyed 564 consumers making up a representative sample (by age and gender) of the U.S. population.
We worded the questions to ensure that each respondent fully understood the meaning and the topic at hand.